Cisco Kills The Flip Cam, Restructures Consumer Business

Cisco (NSDQ: CSCO) is closing down its Flip Cam business and is pulling back on certain areas on its consumer business. Instead, CEO and Chairman John Chambers says Cisco will concentrate more specifically on what it considers the basics: core routing, switching and services; collaboration; architectures; and video.

Taking the wider changes the company is making into account, about 550 Cisco employees will lose their jobs, resulting in writedowns of no more than $300 million.

In terms of rethinking its consumer strategy, Flip Cam was related to its video plans, but with the inclusion of higher quality videocams in smartphones, the market for the relatively cheap and eminently portable Flip Cam appeared to be drying up — at least as far as Cisco was concerned.

The big question mark here is whether a company like Cisco, built on offering networking and enterprise services, can make the effective move to consumer products, although it’s been something they’ve been trying for years now.

The company has made a number of acquisitions in the enterprise video space over the past few years. The most recent deal was back in August, when Cisco paid an estimated $80 million for ExtendMedia, a company that specializes in managing online video content and therefore, not a consumer-facing business. Before that, there was the huge $3.41 billion purchase of Tandberg.

But Cisco’s $590 million all-stock purchase of Flip cam manufacturer Pure Digital was one of the early deals it made in the video space. The company says it will still support current FlipShare customers and partners with a transition plan, but Cisco did not elaborate on that. Release

Moving too slow: That said, in a blog post last week featuring a message to staffers from Chambers, the CEO previewed some of the changes that were announced today.

In discussing the changes in networking and in the video space, Chambers’ memo stated: “The Internet has taken on an entirely new form– and our growth strategy has been based on capturing the incredible opportunity afforded by this massive demand for the network. Many say that in the face of this expansion, Cisco needs more discipline. I agree.”

He went on to say that while he deemed Cisco’s strategy as “sound,” he conceded that, “We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders. That is unacceptable. And it is exactly what we will attack.”